RMM-Ch7 Quiz

Which of the following best describes the misstatements identified throughout the audit that will be considered at the end of the audit in determining whether the financial statements overall are materially correct?

• Posting materiality.

• Performance materiality.

• Overall materiality.

• Tolerable error.

If materiality judgments change during the audit opinion formulation process, what happens to previous audit decisions that were based on the evidence obtained using the initial materiality setting?

• The auditor reassesses those previous decisions.

• The auditor repeats all audit procedures performed prior to the change in materiality judgments.

• The auditor modifies the audit opinion to note the change in materiality judgements.

• No action is required.

Which item is correct concerning the risk of material misstatement?

• Risk of material misstatement arises because audit procedures have been misapplied.

• Risk of material misstatement can be controlled and changed by the auditor.

• Risk of material misstatement must be assessed in non-quantitative terms.

• Risk of material misstatement is controllable by the client.

What is the nature of the relationship between risk of material misstatement and audit risk?

• Direct.

• None.

• Correlational.

• Inverse.

Detection risk is affected by which aspects of substantive audit procedures?

• Nature.

• Timing.

• Extent.

• All of the above.

Which of the following factors would lead an auditor to assess inherent risk at a higher level?

• The account balance is easily determined without estimation.

• The account balance is composed of a high volume of nonroutine transactions.

• The account balance is composed of simple transactions.

• All of the above would lead the auditor to assess a higher level of inherent risk.

To learn more about a company and its inherent risks, auditors can use which of the following resources?

• Management inquiries.

• Economic statistics.

• Online searches.

• Any of the above could be used.

Which of the following factors will result in control risk being assessed at a higher level?

• Controls are well designed.

• There is a lack of supervision of accounting personnel.

• Accounting staff are well trained and educated.

• The control environment is operating effectively.

Which of the following are two frequently used planning analytical procedures?

• Reasonableness tests and economic analyses.

• Trend analyses and reasonableness tests.

• Ratio analyses and economic analyses.

• Ratio analyses and trend analyses.

Which of the following best describes year-to-year comparisons of account balances?

• Time analyses.

• Reasonableness tests.

• Ratio analyses.

• Trend analyses.